DeFi’s Competition for Liquidity (Or Called Convex War?)
作者:CompoundWater 複水 ; Contents Also Contribute to MatrixDAO
Contents
What is Curve War?
Why Rely on Curve?
Low Price Slippage and Efficient Trade
Incentive Design: The veCRV Model
How’s Curve War?
Crown Winner: Convex Finance
Turn to Convex War! (The army I hired, still my army)
Conclusion
Reference
Feedback
The competition for liquidity is known as “The Curve Wars.” As protocols are trying to grab liquidity for their own, they either have to buy up $CRV to vote, or “bribe” their users to vote for them.
For example, selling 1000 $ETH to $USDT at the time of writing pays out US$2,673,104 on Curve
But only US$2,455,120 on SushiSwap.
Also, Crypto is a giant game of incentive design, who design their incentives intelligently win massive power and wealth.
When provide liquidity to a pool on Curve, can earn a share of all the trading fees on that pool. But also earn some CRV tokens, as a bonus incentive to you for providing liquidity to that pool.
⇒ You may think at this point, there’s no reason to hold CRV tokens right? what’s different or benefit to do it?
The veCRV Model: more reward and more vote power.
⇒ To get more CRV rewards, people either deposit more liquid in the pool or acquire more veCRV for vote power to vote on which Curve pools get more rewards.
In fact, this war did not attract enough attention at first. Major players such as Yearn Finance and Stake DAO sold CRV in the market after obtaining the incentive of CRV, which lowered the price of CRV, which greatly reduced the price of CRV. Reduces the attractiveness of incentives. But that all changed when Convex came along. This was the first battleground of the “Curve Wars,” and unfortunately it’s almost over. The winner, Convex, is where we turn our attention next.
It is hard for investor to get the maximum yield rate or vote power in Curve by lock a lot of veCRV and 4 years. Convex solved this problem for the average investor by aggregating everyone’s veCRV and deposits.
But How?
So, That liquid veCRV, cvxCRV, allowed Convex to acquire more veCRV voting power than anyone else. That voting power has allowed Convex to control what pools CRV awards are allocated to.
If Convex won the Curve war by controlling all the veCRV, then whoever controls the veCVX could win the Convex Wars.
The current war are mainly based on large-scale algorithmic stablecoin projects, and some defi project (like Frax, Badger, Olympus, Redacted(BTRFLY), UST etc.) are also constantly joining the war. The picture below shows that the participating parties are constantly adding their own weapons: CVX.
Total Dao Owned CVX around 14,196,425 at 202205, and overview Dao Owned CVX market share as below
The eternal theme in Defi is the evolution of capital efficiency. The members of the Curve ecosystem, including itself, are all leading players in the field of improving capital efficiency.
Curve or Convex War is just the beginning. The Liquidity Wars may shape the future of DeFi, and define many of the coming investment opportunities.
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